Monday, November 30, 2009

It seems we never get caught up with the tasks we need to do. Whether it be paying bills, household maintenance, taxes, or gardening, we always seem to be getting to things just in time, without an margin of safety. Starting now, we're going to consciously make a change and try to get ahead, by jumpstarting some of the things we need to do in 2010. Here what we've started early:

Yard work. Our only major task in the fall is to rake up the leaves, for appearance and to avoid killing the grass. Usually, I over seed the grass in the fall, which leads to a great lawn the following spring. In the past we have not done much else.

This year, we decided to weed and mulch our gardens in the fall. I've heard that a fall mulching can reduce the weeds next spring. In addition, I will use any warm days in the winter to trim off the branches on the trees and reduce the amount of ever increasing ivy in our beds.

Taxes. For the past few years, I've taken an automatic extension and filed our taxes around October for the previous year. However, after filing my 2008 tax return in October, 2009, I decided to start working on my 2009 tax return. Although, I usually do some tax planning at the end of the year, I have actually done a rough draft of my 2009 tax return, and have very accurate estimate of our tax liability.

In addition, I've also starting doing our 2010 tax planning, which hopefully, will enable us to significantly reduce our tax liability for 2010.

Household maintenance. I'm targeting to get a number of interior maintenance items done over the winter, which will, hopefully, make the house relativelymaintenance freefrom spring through fall of 2010. This will involve some bathroom caulking, tile grouting, and light fixture upgrading. The one item I may need to leave until spring is replacing the window weather stripping.

Vacation planning. 09/10 is our daughter's last pre-school year, when we still won't feel guilty for having her miss class while on vacation. In the spring of 2010, we'd like to take one more off season trip, to avoid the crowds and get low non-peak prices. At this point, we're starting to consider a visit to the Grand Canyon or Yellowstone.

I'm hoping that getting ahead on a few of our necessary tasks will benefit us. At this point, it feels good that we already have a few things completed that we usually do in the spring. Hopefully, the jumpstart will enable us to have a more relaxing spring, and free up some time to enjoy new activities.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or planning advice. Please consult a professional advisor.

Sunday, November 29, 2009

My spouse is a food scientist and she is very knowledgeable of what is healthy to eat and what is not. Since we've been married, I've been slowly converted to eating healthy. I'm sure I will live 10-20 years longer because of my spouse :-) I now eat lower fat, more whole grains, more vegetables and less meat.

However, I've noticed an unintended consequence from healthy eating. I no longer can routinely eat fast food menu items without my stomach feeling uncomfortable. At first, I thought it was related to the raw onions, but I realized it wasn't just the onions. It's the high fat, high salt and high calories. I now realize that I prefer to have a well balanced meal instead of a fast food quarter pound burger with two slices of cheese and a healthy dose of condiments.

Yes things have changed. I still enjoy a hamburger, but now it's organic, grass fed and 90% lean.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or health advice. Please consult a professional advisor.

Friday, November 27, 2009

With the recent recession, more people are considering working longer. However, finding a new job or career after 50 can be very challenging. America's Silver- Collar Capitalsby Joshua Zumbrun of Forbes, reports on 10 cities where the unemployment rate for retirement age works are low. In fact, the top city of Anchorage, Alaska had an retirement-age unemployment rate of 0%, meaning everyone that wanted a job could get one. Here's the list from the article.

Anchorage, Alaska

Washington, D.C.

Southern Connecticut

Lincoln, Nebraska

Lexington, Kentucky

Houston, Texas

Des Moines, Iowa

Raleigh, North Carolina

Dallas - Fort Worth, Texas

Tallahassee, Florida

Personally, we do not plan to move any of these location for a post retirement-age job. However, I was pleasantly surprised to find a high proportion of desirable locations in the top ten list. For those already living in these areas, finding a job as after retirement age should be less of a challenge.

For more on Reaping the Rewards, check back every Friday for a new segment.

Thursday, November 26, 2009

On this Thanksgiving Day, 2009, here are some things for which I am thankful:

Family - I am thankful for my spouse, who has been with me through the great times and the tough times. I am lucky to have met her and that she said yes to marrying me. I am also thankful for our daughter, who we adopted in 2005, since adoptions are now expected to take more than 5 years after application. I am also thankful for our parents, from whom we learned about good work ethic, persistence, and financial responsibility.

Friends - I have only a few good friends and I met most of them in my teens and twenties, specifically high school, college and my early working years. Although I don't interact with them frequently, I can always count on them for feedback, counsel and support. Fortunately, all of my good friends are still available to help.

Opportunity - I have been blessed with many opportunities to do well. My parents immigrated to the United States before I was born. They were also strong believers in education, sending me to a parochial elementary school and an Ivy League college. In high school, I played for a football coach that started me on the Varsity team as a freshman and led us to a state championship our senior year. I majored in Chemical Engineering, graduating with highest honors, and was hired by a Fortune 100 company, from which I retired 27 years later.

Luck - I am the first to admit that I have been lucky to be in the right place at the right time. From becoming one of the first freshman starters on our Varsity football team to my last promotion at work, I would attribute to event to luck. Another time or another place and it wouldn't have happened for me. I am thankful for luck, especially since I don't know how it happens.

Finally, as always, I am thankful that I had another birthday and am a year older. Growing older is always better than the alternative :-)

For more on Reflections and Musing, check back on Saturdays which is the normal day for this segment.

This is not financial or Thanksgiving advice. Please consult a professional advisor.

Wednesday, November 25, 2009

Although we qualified for the Cash for Clunkers and the new Home Buyer's Credit program, we passed on on participating, for one of the same reasons we don't go to Black Friday sales -- if we needed it, we would have already bought it. The other reason we aren't taking advantage of these credits is that using them would cause us to take on debt or reduce our savings, neither of which we want to do. Here's our thinking on these stimulus programs.

Cash for Clunkers. We both drive vehicles that are 6 years old. Mine qualified for the Cash for Clunkers program because it is a truck. However, the trade in value of my truck was greater than the $4500 stimulus rebate I would receive, thus not making economic sense to participate. In addition, my truck only had 53,000 miles and the maintenance cost is only an oil change every three thousand miles, with a major tune up every 15,000 miles. Also, I was planning to drive it at least 10 years and over 100,000 miles.

Decision: Keep the truck.

Home Buyer's Credit. We did not qualify for the first time home buyer's credit, since we already own a home. We do qualify for the extended program, which includes all people buying homes, under certain income restrictions. However, since we just paid off our mortgage and achieved zero debt, we are not going to buy another home. Besides, we are happy with our current home and plan to stay until our daughter goes to college, in about 13 years.

Decision: Keep our house.

For us, the financial decision was easy. If we were currently looking to buy a car or house, we may have taken advantage of the tax credits. However, the new tax credits did not incentivize us to do something that we weren't already planning to do.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

Tuesday, November 24, 2009

"Always ask for something you want. The worst that can happen is the answer is 'no'." ~ saying at work

Tonight I met a friend at a local restaurant. I chose the location because they previously had a great happy hour deal of $1 pints. Although I didn't call ahead to check, I noticed a poster advertising $1 pints when I entered.

However, when we received the check, we were charged $2 per pint, because the beers were imports. The bartender pointed to a new banner that advertised the new prices. I was surprised since I sure that I had seen something earlier advertising $1 pints for all beers. I walked to the entrance, found the poster and pointed it out to the hostess, who told me it was the manager's decision. I showed the manager the sign, which he acknowledged, but told me he couldn't reduce the beer prices due to state liquor laws. I told him I understood, but asked if he could comp the appetizer instead, which was an equivalent discount. I figured we were going to pay the new full price, but decided it wouldn't hurt to ask, very nicely.

The manager agreed and comped the appetizers, effectively giving us the $1 price for pints. We still gave the bartender a tip on the original prices, which was a 50% tip on the discounted price. Also, we left as satisfied customers, who will very likely return.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

Monday, November 23, 2009

Black Friday is an annual event for retailers to entice consumers into stores with special, low price deals that aren't offered any other time of year. Every year, I enjoy reading about the great deals I could get. And every year, I enjoy staying home and avoiding the mad rush. Here are my reasons for not shopping on Black Friday:

4:00 AM is too early to rise. I'm not getting early on to go shopping. To me, it seems ridiculous to lose several hours of sleep for a chance at a good deal. When I was working, Black Friday was a holiday. Now, I'm retired and every day is a holiday:-) I'd rather get the sleep time.

If I needed it, I would have already bought. I follow a principle of buying only what I need. A great sale price does not change an item from the "not needed" category to the "needed" category.

Limited quantities mean I won't be in time. A lot of the great deals often have a disclaimer such as "limited quantities, minimum of (single digit) per store." Thus, only the first few customers wanting to buy the item will get it, meaning my chances are a like a lottery.

So this year, as with previous years, I will be sleeping and missing all the great deals from retailers.

For more on Strategies and Plans Ideas, check back every Monday for a new segment.

This is not financial or shopping advice. Please consult a professional advisor.

Sunday, November 22, 2009

After watching the new administration over the past 10 months, I believe the following will happen in the next few years:

High inflation. The high level of deficit spending by the government is bound to create significant inflation. The more dollars that are printed, the less they are worth. In addition, as the dollar is devalued versus other currencies, the cost of imported goods will go up.

Higher health care cost, lower quality. I have yet to see our government reduce spending, cut costs, or improve efficiency in any area and I don't expect it to be any different for health care. If the recent dispute over the use of mammograms is an indication, I also expect health care to be worse for the users of the government health care system.

Taxes will be higher for everyone. Only taxing the rich can't work, because the rich don't make enough money to cover all the additional government spending, even if they were taxed at 100%. The government will figure out a way to increase taxes on the broader population, even if they aren't call taxes.

Recession recovery will be slow. In my opinion, the government has used to recession to create political programs, instead of delivering the necessary economic programs. For example, about 25% of the $787 billion stimulus package has been spent to date. If it was so critical to rush the legislation through Congress, why has only such a small percentage been spent over the first 9 months?

Based on the direction that our government is taking, I see these outcome being very possible. I would be very happy to be proven wrong. In the meantime, we'll be modifying our financial plans to account for the possibility of the above scenario.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or economic advice. Please consult a professional advisor.

Friday, November 20, 2009

In my opinion, aging gracefully must be an urban myth that's been perpetuated by personal development or self help literature. I, for one, am not aging very gracefully. Here are my examples of ungraceful aging.

Longer times to heal. Seemingly minor injuries take weeks, months and even longer to heal. I can no longer take it easy for a week and be full strength again in a short period. Three years ago, I had foot pains that lasted over a year. Recently, I strained my knee at the end of the summer and it still has not fully healed.

In addition, I seem more susceptible to injury, with small bumps and sprains becoming bigger issues.

Slower. Although I still have some quickness, I am much slower in the sports that I play. While my mind still thinks I can, I am no longer reaching balls that used to be routine in the past. For our household maintenance, it takes me much longer to do my current tasks or learn to do new tasks.

Aching joints. I'm guessing that some of my joints are starting to get arthritic. They ache, even though there is no apparent injury. In addition, they get stiff after sitting or lying in the same position for an extended period.

Aging gracefully definitely in not in my future. However, I do think I can age respectfully, by adapting to my physical changes, keeping a positive attitude and overcoming challenges on a regular basis. In addition, I can try to remain young in mind and young in heart :-)

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or health advice. Please consult a professional advisor.

Thursday, November 19, 2009

Several years ago, my spouse and I set up revocable living trusts to minimize our federal estate taxes. Under current laws, we would incur no federal estate tax since the assets in each trust are below the $3,500,000 exemption for 2009. Unfortunately, even though there are no federal taxes would be owed, our estates mightbe responsible for state estate taxes, since our residence is in one of 22 jurisdictions (21 states and the District of Columbia), that levy estate taxes on amounts less than the federal exemption.

The state exemptions are as low as zero, with the majority of exemptions at $1 or $2 million. The state estate tax rates range from 3% to 20%, with the majority in the 15 to 16% range. At this point, I'm not going to worry too much about state estate taxes, since we're not planning to die anytime soon:-) However, as we get older, moving to a state without an estate tax may become a consideration, especially if our assets exceed the state exemption.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or estate planning advice. Please consult a professional advisor.

Wednesday, November 18, 2009

"Those who cannot remember the past are doomed to repeat it." ~ George Santayana

The financial crisis of 2008 to 2009 has helped us clarify our thinking on our retirement investments. Here are the conclusions or changes we have made:

Keep short term fund needs in investments with certain returns. We were fortunate to have 3 - 4 years of living expenses in CDs, bonds and money market funds. The CD and bond yielded between 3 and 5%, while money market rates were much lower. Going forward, we plan to sell our stock investments to always keep 3-5 years of funds in fixed income investments with more certain returns.

We will also apply this concept to our daughter's college savings. About five years before she needs the funds, we will convert from equity investments to short term CDs.

Accept variability of short term returns with long term investments. A common investment mistake was to expect the 7-8% long term returns of the stock market for each and every year. As we learned, in the short term, there can be significant negative returns even with a positive long term average return. However, it is important not to sell long term investments just because the market is down in the short term.

Other than selling enough stock to pay off our mortgage, we have stayed invested in equities at close to the same level as before the market crash. In addition, we have kept our daughter's college 529 fund invested in stock mutual funds.

Be wary when an asset class yields big short term profits. When everyone claims to be making money, the peak for that asset class is likely getting close. This phenomena happened in both the tech stock bubble and the housing bubble. When it seemed everybody and anybody were making money in these investments, the market soon peaked and then crashed.

As a rule for the future, we will take profits if as the proportion of a specific equity or asset class increases significantly in a short period. In 2008, I sold some of my company stock near its 2007 high. My father-in-law took profits in his energy investments as they rocketed and became a larger proportion of their portfolio.

Now that the market has recovered and reached the levels of a year ago, I'm going to remember these lessons from the past year, especially if the stock market continues rallying into 2010.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Monday, November 16, 2009

For now, I expect the current stock market advance to continue until the end of the year. The rally, which began on March 9, 2009, continues to avoid a 10% correction, although it has seen a couple 6-7% declines. Here's why I think the rally will continue:

Panic buying. Investors that have been out of the market and waiting for a correction have missed the biggest stock market rally since the 1930s. Soon some of these investors will get back in the market to avoid missing out on further gains, driving the market up more.

Incentives to buy are increasing consumer spending. From Cash for Clunkers to Home Buyer Tax Credits consumers are taking on more debt to do more spending. These government programs are giving the economy a short term boost and may even provide a psychological boost to help holiday retail sales.

Window dressing. Mutual fund managers will want to have good performing stocks in their portfolio at the end of the quarter. These purchases will drive up the stocks that have good returns this year.

For now, we will continue to stay invested in the market and, hopefully, benefit for the year end rally. However, should the market advance sharply in the next few months, we will definitely use the opportunity to sell and lock in some profits.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Sunday, November 15, 2009

Our investments is starting to show positive returns as a result of the economic recovery. For most of 2009, the gain/loss column was mostly red, meaning that most of our investments were losses. In the past week, the gain/loss column for our investments became mostly green, indicating that the majority of our investments had gains.

The gains are still small and we have not recovered all the losses that have happened since October, 2007, when the market peaked. However, small gains are better that large losses, and hopefully, the economic recovery will continue.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Saturday, November 14, 2009

When I was working, we had a simple rule for accountability. Once I took over a project, I was immediately responsible for the outcome. If the project was a success, the team received the credit. If the project failed, it was my fault. I couldn't claim that my predecessor was the reason for failure. After all, my job was to ensure success, which meant making corrections if necessary.

Apparently, some in government do not have the same concept of accountability. There are still government officials that assign the slow economic recovery to the previous administration. HELLO, the previous administration has been voted out and has been out of office since January, 2009. Yes, the previous administration can be blamed for causing the crisis. However, I consider the status of the economic recovery to be the responsibility of the current administration.

For more on Reflections and Musings , check back every Saturday for a new segment.

This is not financial or policy advice. Please consult a professional advisor.

Friday, November 13, 2009

In October, 2007, I retired from my job, while still in my forties. I know that some people questioned whether it was really a retirement or whether it was just simply a job resignation, followed by unemployment. In my case, I consider it retirement and here are the reasons.

Retiree benefits. I received all the benefits that a retiree gets from my company - health insurance, access to company offices, and participation in all retiree programs.

Nobody in our family is employed full time, by choice. In addition, neither my spouse nor I are looking for full time employment. The only work we do are part time jobs, in areas we consider fun and interesting.

Live primarily on savings or pension. About 90% of our living expenses come from our savings and the earnings. Since we are both under 59 1/2, we cannot withdraw money from IRAs or 401Ks without penalty, and therefore have not used these funds yet. The other 10% of our living expenses is covered by the part time work I do.

I still get a lot of quizzical looks when I say I'm retired, mostly because I look 5 to 10 years younger than my age. However, based on the criteria outlined above, I think I have earned the privilege of saying I'm retired.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Thursday, November 12, 2009

My mom has been in a nursing home for almost three years. In my previous visits, I was always looking for my mom of my past. Throughout my childhood, my mother was always an energetic caregiver for her family, e.g. raising kids, maintaining the household and while keeping spotless home, which was her pride and joy. In the few years prior to my dad's death, my mom's capabilities were clearly declining. She no longer would clean the house, she stopped cooking and wasn't as agile with her grandchildren. She had loss the initiative and spirit she had in her younger days.

When she entered the nursing home, it only seemed to get worse, since she lost her ability to independently control her life. The visits to the nursing home have been challenging for me since I wanted my mom to match my memories . However, on this visit, I decided to follow some advice I heard on the radio, which was to enjoy my mom as she is today.

Here's what I did:

Let my mom control the visit. Instead of taking charge, as I did in previous visits, I would ask my mom questions and let her take charge. For example, my mom requires assistance for eating and did not seem to be eating enough. So in previous visits, I would always use the opportunity to feed her. This time I asked her if and what she wanted to eat. If she didn't want to eat, I didn't try to feed her.

Also, I let her do what she wanted. Even when her schedule required her to be sitting in the common room, I would take her back to her bed when she wanted to sleep. As she slept, I would stay in the room, watching TV. If she woke up, I would talk to her about my childhood memories.

Know my mom is a different person. As much as I want my mom to be the person with whom I grew up, I realize she is the is the person she is today. I accept that she will never cook my favorite meal again, nor will she help me with my new challenges. My mom of today enjoys life in a different way, and I have accepted that.

Change me, instead of change her. Instead of trying to recreate my mom of my childhood, as I had done previously, this time I adapted to become her child of today. I decided I would be there and be company. We talked about the past, I thanked her for raising us well, and let her rest. She seem to appreciate having me there, even though she spent most of the time sleeping.

The last visit has been my best time with my mom so far since my father passed away in 2006. I visited with her 6 - 7 hours each day, talking with her when she was awake, and reading or watching CNBC on TV when she was asleep. I'm sure she enjoyed having me there, since she asked for a nurse much less frequently, and I enjoyed sharing time with her or when doing my other activities.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or senior care advice. Please consult a professional advisor.

Wednesday, November 11, 2009

Quiz: Think You Understand Markets. Prove it. . . is a 14 question quiz on stocks, bonds and investing taken from Financial Industry Regulatory Authority's test of investor knowledge. As a personal finance junkie and an experienced investor, I was able to answer 13 out 14 correctly in about 5 minutes, without looking up any of the questions :-)

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Net worth is a common measure used for tracking personal wealth. Net worth is the value obtained from summing all assets and subtracting all liabilities. Simply, net worth is equal to all belongings minus all debts.

When I was younger, I used net worth to measure my wealth accumulation. However, I as got older, I realized that net worth alone didn't provide enough perspective on readiness for retirement. For example, consider the three situations in the table below.

Net Worth Comparison

Examples

Assets

Liabilities

Net Worth

High Debt

$5 million

$2 million

$3 million

Illiquid Assets

$3 million (houses, land, yacht, etc.)

$0

$3 million

80% Liquid Assets

$3 million ($600,000 in illiquid assets and the rest in stocks, bonds, and cash)

$0

$3 million

While all three have $3 million in net worth, the readiness for retirement situation is very different. In the high debt example, the person has a minimum debt payments of $140,000/year , assuming a 7% interest rate, before other living expenses. In the illiquid asset/no debt example, the assets likely have fixed maintenance costs and do not generate income. Assuming 2% maintenance costs, the person would need $60,000 per year. In the 80% liquid assets/no debt example, the investments are generating income, and the assets require less annual maintenance money (e.g. $12,000/year at 2%).

I came to this understanding back in 2006 and stopped using net worth as a measure of our wealth. As a replacement measure, I started using Savings Ratios and Debt Ratios, as explained in How Much is Needed to Be Wealthy - THE NUMBER .

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial, saving or retirement advice. Please consult a professional advisor.

While I love the stock market advance, I can't help thinking we're in the midst of a bubble, which is soon to be a very big one. Low interest rates have created two major bubbles in the past, the stock market tech bubble of the late 90s and the real estate bubble of the mid 00s. Low interest rates fueld both bubbles, which eventually burst after a few years.

Nowadays, we have a similar low interest rate environment and the stock market is making significant advances, not seen since the 30s. With the Dow crossing 10,200 on Monday, November 9, 2009, I expect panic buying to continue, resulting in a rapid rise. However, as with all bubbles, I expect there to be eventual bursting. In the meantime, I hope to profit from the bubble before the inevitable burst :-)

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Monday, November 09, 2009

Since taking early retirement in 2007, I've have been managing our taxable income to minimize our liability for federal and state income taxes. In 2008, I thought it might be possible to have zero federal tax liability, due to the 0% long term capital gains tax for 2008 - 2010 tax years. Unfortunately, the bear market of 2008 -2009 created enough losses that I probably won't have taxable long term capital gains for several years :-(

However, in doing a year end estimate of our 2009 tax return, I realized there was a possibility of have zero tax liability in 2010, by taking advantage of three tax credits, the Child Tax Credit, Making Work Pay Credit, and Saver's Credit, which would offer as much $2800 in credits for our situation. To take advantage of the credits, we would need to do the following:

Keep Adjust Gross Income (AGI) at $55,500 or less. $55,500 is the highest AGI for which a couple filing jointly can qualify for a 10% Saver's credit on the first $2000 of contributions. Our maximum possible credit is $1,000, which we can achieve by making contributions to our Roth IRA accounts and keeping AGI below $33,500 for married filing joint.

At this AGI, we would also qualify for the Making Work Pay ($800) and Child Tax ($1000)Credits.

Earn a minimum of $12,903 in wages. This will qualify us for the maximum Making Work Pay credit of $800 for a couple filing jointly. In addition, it will qualify us to contribute $11,000 to our Roth IRA account, qualifying us for up to a $1,000 Saver's Credit.

Achieve taxable income of $20,250 or less. According to the 2010 tax tables, the tax liability for a couple filing jointly with taxable income of $20,250 (line 43 of 2009 form 1040) and filing jointly is $2,200. We would qualify for enough tax credits to completely eliminate the tax owed.

For our 2010 situation, we will have deductions of $22,350 for personal exemptions and the standard deduction. Thus, tentatively, our AGI can be as high as $42,250 to have a federal tax liability of zero. The concept of paying zero federal income tax is appealing and to achieve that goal we will need to significantly reduce the planned Roth IRA conversions in 2010.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Friday, November 06, 2009

In the past two months, I've gone from no part time jobs to having three part time jobs concurrently for November through January. If all goes well with the third part time job, it may last through April or even become a regular part time job. The best news is that if the third part time job were permanent, it would cover almost 25% of our annual expenses for 20 hours work per month.

The job is with a supplier to the company from which I retired. They have hired me as a advisor to help them generate more business with my former company. For me, this part time assignment is a perfect fit. When I was working, I would give the supplier advice on how they could be more help to my company. Now, I am going to be paid to implement the advice I was giving while I was working :-)

While the offer was for up to 6 months, I asked for a 3 month contract with option to renew. I did this for two reasons:

I wanted only a short term commitment, giving the supplier and me a gracious way (non-renewal) to end the arrangement, if things didn't work out. Since taking early retirement in October, 2007, I've enjoyed working part time for a maximum of 3 to 4 months and then taking a break until the following year. I wasn't looking forward to committing to more than 4 months yet.

I wanted to create a sense of urgency to do the project. I really believe the assignment can be done in three months or less. With only a three month assignment, I can motivate both companies to make decisions or take actions on the proposal that has been made. I didn't want the work to expand to fill the time, if the assignment was 6 months.

Overall, this should be a very enjoyable part time job. I get to reconnect with colleagues from my last assignment before retiring. I get to leverage my skills and experience in my areas of expertise. Finally, I get to start and successfully complete the project in only three months, which would be very satisfying to me.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or job advice. Please consult a professional advisor.

Wednesday, November 04, 2009

Increase Your Retirement Income by Mary Beth Franklin of Kiplinger offers a new twist on how to think about withdrawing from retirement savings. Historically, advisors have used a withdrawal rate of about 4%. The article describes an approach of laddering investment risk by the time segment needed, with the least risky being short term and the most risky being long term.

In this model, near term income needs would be invested in money market funds and CDs. The next time segment would be bonds. Longer time frames would be invested in stocks, covering income and growth, growth and aggressive equity investments depending on the time frame.

Overall, I like this style of asset allocation based on time. While we weren't aware of this specific retirement investing method , we found the approach of keeping short term expense needs (3-4 years) in money market funds and CDs very helpful during the 2008 - 2009 bear market. Thus, when the market turned down, we did not liquidate equity investments at low prices to generate cash for living needs.

At the moment, this type of approach is working for us. However, for this approach to work, the economy and stock market will need to recover over the next few years, which I think is a reasonable assumption for now.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Monday, November 02, 2009

Based on the market action on Friday, October 30, 2009, and the bankruptcy filing of CIT over the weekend, it appears the much anticipated stock market correction may be beginning, again. If the correction should finally happen, I will be ready to buy after about a 10-15% drop. My plan is to invest a no more than 20% of my funds at each buy point, in case the market keeps declining, as it did in October, 2008 through March, 2009.

On the other hand, I've been expecting a correction since May, 2009. I wouldn't be surprised if I'm wrong again, and a correction does not occur. If the last week's market decline is another in a series of correction "head fakes," I have enough funds invested to participate in a continued advance.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Sunday, November 01, 2009

I am giving up the ways of the pack rat. In the next few months, I will be making the effort to reduce clutter my life. I am convinced less clutter will make my life better, because I will have less things to think about, maintain and keep in storage. In the first phase, I am taking a shed and shred approach.

Shed - I am giving away items which aren't not being used. My initial criteria is at least once per year, to account for seasonal usage. If it hasn't been used in that time frame, then it will likely be giving away. The main exceptions are books and board games.

Using this criteria, we've identified numerous items for giving to charity. Items include old stereo systems, furniture from our childhood, various auto and yard tools, and, of course, clothes. In addition, we will probably start giving away some of the baby clothing since we have waited three years for a second adoption, and the chances are looking close to zero.

A benefit is that we will be able to deduct the fair market value of items donated to charities. Since we plan to itemize for 2009 and take the standard deduction for 2010, we are targeting to have all the donations made in 2009. Thus, we are on a mission to get rid of unnecessary items by December 31 of this year.

Shred - After my father passed away, I went through his saved paperwork to determine what was useful and what could be discarded. I soon determined that over 95% of the papers he kept were not of any use, which made it hard to find the 5% of valuable paperwork (e.g. deeds, recent tax returns, property tax bills, etc.).

It didn't take to long for me to realize that this acorn didn't fall too far from the tree. I routinely keep one to two years of paid utility and credit card bills, three years of brokerage financial statements, two years of health insurance statements, employer benefit statements, interesting articles and so on. While the papers are somewhat organized in file cabinets and binders, I had to question the value and effort of keeping and maintain these records. After all, I knew that over 95% would not be of use anytime in the future. Besides, based on recent experience, it seems I can call many of the institutions for the information, at no charge.

Thus, we made the decision to shred all statements and bills that could be accessed electronically. From now on we only plan to keep those records related to doing taxes, and only for three years. In addition, we still plan to keep our tax return copies indefinitely. To expedite the process, we purchased a 12 sheet power shredder, which has made getting rid of sensitive documents in an efficient way.

After a spending the past week down cluttering, I feel like we have made great progress. We've eliminated several things that we don't use any more, created more space in our house, and freed up binders and file space. Best of all, we now have less stuff to maintain and repair in the next year :-)

For more on New Beginnings, check back every Sunday for a new segment.

About Me

My wealth goal is to create a guaranteed yearly income stream equal to my highest salary for my retirement years. While I have developed a strategy to do this,
I am interested how others are thinking of achieving financial security for retirement.
This blog is a summary of facts, ideas, discussions, and action plans to achieve that goal.

Disclaimer

This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.

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Disclaimer:
This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results
based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.